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Reviewed 18 May 2011

The Hargreaves Report shows potential to boost economy

Changes to Intellectual Property systems could add up to £7.9 billion to the UK’s economy, the first report looking at how it can drive growth said today.

The publication of Digital Opportunity follows a six-month independent review of IP and Growth, led by Professor Ian Hargreaves. He was asked to consider how the national and international IP system can best work to promote innovation and growth.

His recommendations aim to give the UK a competitive advantage – and put it on a par with international competitors. Taken together, they have the potential to add up to 0.6 per cent to annual GDP and to cut the costs of doing business with IP-related business by £750m within a decade.

The key recommendations are:

  • the UK should have a "Digital Copyright Exchange": a digital market place where licences in copyright content can be readily bought and sold, a sort of online copyright shop.
  • the Government should legislate to permit access to orphan works, where the owner cannot be traced. For example some copyrighted works remain locked away because their authors either aren’t known or can’t be traced to give permission for use. In the worst cases, where one owner cannot be located - just one out of hundreds contained in a film or TV programme - they can effectively hold the interests of others to ransom as it becomes a criminal offence to exploit that work commercially.
  • updating what it is lawful to copy. This includes copying for private purposes (such as shifting music from a laptop to an mp3 player) and copying which does not conflict with the core aims of copyright – for example, digital copying of medical and other journals for computerised analysis in research. For example an academic working on malaria cannot draw on previous research through data mining because they cannot get permission to copy the datasets they need to mine.
  • the Government’s IP policy decisions need to be more closely based on economic evidence and should pay more attention to the impact on non-rights holders and consumers;
  • changes to the Intellectual Property Office’s (IPO) powers to enable it to help the IP framework adapt to future economic and technological change

Professor Hargreaves said:

"In recent years, the UK has failed to make the changes needed to modernise copyright law, for which we will pay an increasing economic price as we make our way into the third decade of the commercial internet. My recommendations set out how the IP framework can promote innovation and economic growth in the UK economy.

"The recommendations of the review are designed to enhance the economic potential of the UK's creative industries and to ensure that the emergence of high technology businesses, especially smaller businesses, in other sectors is not impeded by our IP laws."

Business Secretary Vince Cable said:

"The Government is wholly focused on boosting growth – and we can’t afford to shy away from looking at complicated or controversial areas. That’s why I welcome this report and its clear link between intellectual property and potential economic growth.

"The report highlights real scope for changes to copyright laws which could add enormous value to the UK economy.

"Intellectual Property has an enormous impact on individuals, businesses and industries across the UK. It affects what we can and can't do in business, education and in our daily lives. Technological innovation, successful creative businesses and strong international brands need to thrive."

The Chancellor of the Exchequer, George Osborne said:

"It is vital that our Intellectual Property laws incentivise innovation and investment, helping to drive the private sector-led economic recovery.

"I warmly welcome Professor Hargreaves’ review on how the Intellectual Property framework can be updated to better support economic growth in the digital age."

Minister for Intellectual Property Baroness Wilcox added:

"The Review presents opportunities to support dynamic UK businesses which will deliver innovation, growth and jobs in the years to come. It offers us the chance of a future with a developing market for Britain's creative talent, where the value of innovation and research outweighs the fear of piracy and counterfeiting.

"This report is the culmination of six months of work by Professor Hargreaves and his panel of experts. We thank him and his colleagues for their hard work and we will be giving the review’s recommendations serious consideration and providing a full response soon."

The recommendations in the report cut across a number of different policy areas and will be of interest to all Government Departments. The recommendations on copyright will be of particular interest to the Department for Culture, Media and Sport and the Department of Education.

Hargreaves Review Recommendations

1. Evidence. Government should ensure that development of the IP System is driven as far as possible by objective evidence. Policy should balance measurable economic objectives against social goals and potential benefits for rights holders against impacts on consumers and other interests. These concerns will be of particular importance in assessing future claims to extend rights or in determining desirable limits to rights.

2. International priorities. The UK should resolutely pursue its international interests in IP, particularly with respect to emerging economies such as China and Review of Intellectual Property and Growth India, based upon positions grounded in economic evidence. It should attach the highest immediate priority to achieving a unified EU patent court and EU patent system, which promises significant economic benefits to UK business. The UK should work to make the Patent Cooperation Treaty a more effective vehicle for international processing of patent applications.

3. Copyright licensing. In order to boost UK firms’ access to transparent, contestable and global digital markets, the UK should establish a cross sectoral Digital Copyright Exchange. Government should appoint a senior figure to oversee its design and implementation by the end of 2012. A range of incentives and disincentives will be needed to encourage rights holders and others to take part. Governance should reflect the interests of participants, working to an agreed code of practice. The UK should support moves by the European Commission to establish a framework for cross border copyright licensing, with clear benefits to the UK as a major exporter of copyright works. Collecting societies should be required by law to adopt codes of practice, approved by the IPO and the UK competition authorities, to ensure that they operate in a way that is consistent with the further development of efficient, open markets.

4. Orphan works. The Government should legislate to enable licensing of orphan works. This should establish extended collective licensing for mass licensing of orphan works, and a clearance procedure for use of individual works. In both cases, a work should only be treated as an orphan if it cannot be found by search of the databases involved in the proposed Digital Copyright Exchange.

5. Limits to copyright. Government should firmly resist over-regulation of activities which do not prejudice the central objective of copyright, namely the provision of incentives to creators. Government should deliver copyright exceptions at national level to realise all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving. The UK should also promote at EU level an exception to support text and data analytics. The UK should give a lead at EU level to develop a further copyright exception designed to build into the EU framework adaptability to new technologies. This would be designed to allow uses enabled by technology of works in ways which do not directly trade on the underlying creative and expressive purpose of the work. The Government should also legislate to ensure that these and other copyright exceptions are protected from override by contract.

6. Patent thickets and other obstructions to innovation. In order to limit the effects of these barriers to innovation, the Government should: take a leading role in promoting international efforts to cut backlogs and manage the boom in patent applications by further extending "work sharing" with patent offices in other countries;

work to ensure patents are not extended into sectors, such as non-technical computer programs and business methods, which they do not currently cover, without clear evidence of benefit; investigate ways of limiting adverse consequences of patent thickets, including by working with international partners to establish a patent fee Review of Intellectual Property and Growth structure set by reference to innovation and growth goals rather than solely by reference to patent office running costs. The structure of patent renewal fees might be adjusted to encourage patentees to assess more carefully the value of maintaining lower value patents, so reducing the density of "patent thickets".

7. The design industry. The role of IP in supporting this important branch of the creative economy has been neglected. In the next 12 months, the IPO should conduct an evidence based assessment of the relationship between design rights and innovation, with a view to establishing a firmer basis for evaluating policy at the UK and European level. The assessment should include exploration with design interests of whether access to the proposed Digital Copyright Exchange would help creators protect and market their designs and help users better achieve legally compliant access to designs.

8. Enforcement of IP rights. The Government should pursue an integrated approach based upon enforcement, education and, crucially, measures to strengthen and grow legitimate markets in copyright and other IP protected fields. When the enforcement regime set out in the DEA becomes operational next year its impact should be carefully monitored and compared with experience in other countries, in order to provide the insight needed to adjust enforcement mechanisms as market conditions evolve. This is urgent and Ofcom should not wait until then to establish its benchmarks and begin building data on trends. In order to support copyright holders in enforcing their rights the Government should introduce a small claims track for low monetary value IP claims in the Patents County Court.

9. Small firm access to IP advice. The IPO should draw up plans to improve accessibility of the IP system to smaller companies who will benefit from it. This should involve access to lower cost providers of integrated IP legal and commercial advice.

10. An IP system responsive to change. The IPO should be given the necessary powers and mandate in law to ensure that it focuses on its central task of ensuring that the UK’s IP system promotes innovation and growth through efficient, contestable markets. It should be empowered to issue statutory opinions where these will help clarify copyright law. As an element of improved transparency and adaptability, Government should ensure that by the end of 2013, the IPO publishes an assessment of the impact of those measures advocated in this review which have been accepted by Government.

Notes to editors:

1. A full copy of the report is available from the IP Review website.

2. Prime Minister David Cameron unveiled the six-month review during a speech at a major event in Shoreditch in November 2010.

3. Professor Ian Hargreaves holds the chair of Digital Economy at the Cardiff School of Journalism, Media and Cultural Studies and Cardiff Business School. As a distinguished academic, journalist and public servant, he has held senior positions at the BBC, Financial Times, The Independent, and New Statesman. He was a founding non-executive board member of the Office of Communications (Ofcom) and an executive board member, and Director of Strategic Communications at the Foreign and Commonwealth Office.

4. The expert panel consisted of Tom Loosemore, Roger Burt, Professor David Gann, Professor James Boyle and Professor Mark Schankerman.

5. It will also form part of the Government’s wider Growth Review which is examining how we can remove the barriers to achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries.

6. It examined the available evidence as to how far the IP framework currently promotes these objectives, drawing on US and European as well as UK experience, and focused in particular on:

  • Identification of barriers to growth in the IP system, and how to overcome them;
  • How the IP framework could better enable new business models appropriate to the digital age.

7. BIS's online newsroom External Link contains the latest press notices, speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts.

Date of release: 18 May 2011